Pending Home Sales Creep Up 0.4% in April

Author: Tory Barringer May 29, 2014

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Pending home sales ticked up again in April, signaling further sales growth to kick off summer.

The National Association of Realtors (NAR) recorded a 0.4 percent gain in its Pending Home Sales Index(PHSI) for April, bringing it up to 97.8. A measure of contract signings, the index serves as a forward-looking indicator for future sales activity.

"Higher inventory levels are giving buyers more choices, and a slight decline in mortgage interest rates this spring is raising prospective buyers' confidence," said Lawrence Yun, chief economist at NAR.

Compared to last year, pending sales were still slow, falling 9.2 percent from April 2013 as rising housing costs and diminished supply hinder buyers. With activity just now starting to pick up after a weak first quarter, the group expects annual existing-home sales this year to come in "modestly below" last year's total of 5.1 million before recovering to an anticipated 5.3 million next year.

However, with mortgage rates and home prices still trending upward, Yun says sales conditions will also depend on income growth to match those increases, along with changes in the labor market and in mortgage underwriting conditions.

"An uptrend in closed sales is expected, although some months will encounter a modest setback," he said.

A pickup would be welcome news for the existing single-family home market, which saw sales steadily decline until finally improving in April for the first time this year.

Around the country, pending sales bumped up 0.6 percent in the Northeast and 5.0 percent in the Midwest compared to March. Those increases were offset slightly by declines of 0.6 percent and 2.9 percent in the South and West.

Relative to April 2013, sales numbers were down in all regions, with declines ranging from 6.4 percent in the South to 15.0 percent in the West.

Mortgage Rates Continue to Slip

Author: Tory Barringer May 22, 2014

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Mortgage rates have yet to find their bottom in 2014, dropping again this week to their lowest level since last October.

In its weekly Primary Mortgage Market Survey, Freddie Mac recorded the average rate for the 30-year fixed-rate mortgage (FRM) at 4.14 percent (0.6 point), down from 4.20 percent last week.

Last May, the 30-year fixed was at 3.59 percent and climbing amid speculation the Federal Reserve would soon start tapering its monthly asset purchases. The first cut didn't arrive until seven months later, in December.

The average 15-year FRM also dropped, declining to 3.25 percent (0.5 point) from 3.29 percent.

Turning to adjustable-rate mortgages (ARMs), Freddie Mac reported a slight decline in the average 5-year ARM, which was measured at 2.96 percent (0.4 point) for the week. The 1-year ARM was flat at 2.43 percent (0.4 point).

Declines were also reported from Bankrate.com, a personal finance website.

In its national survey, Bankrate recorded the 30-year fixed at 4.29 percent and the 15-year fixed at 3.38 percent, both down 4 basis points from last week. The 5/1 ARM, meanwhile, declined a full tenth of a percent to 3.21 percent.

Analysts for the site pointed to economic concerns both domestic and abroad as the cause for the latest drop: "The Federal Reserve remains concerned about inflation being too low, readings on the housing market have been disappointing of late—both of which lead to uncertain conclusions about the U.S. economy—and the European Central Bank is widely expected to begin their own round of bond purchases in the coming months.

"Each of these argues for interest rates, including mortgage rates, remaining lower than expected, longer than what had been expected just a few months ago."

Default Rates Decline in April to Lowest Post-Recession Rate

Author: Colin Robins May 20, 2014

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Data through April 2014 showed a decline in the national default rate from March, according to S&P Dow Jones Indices and Experian for the S&P/Experian Consumer Credit Default Indices. The indices are a comprehensive measure of changes in consumer credit defaults, released monthly.

The national composite default rate recorded its lowest post-recession figure of 1.11 percent in April. The month's number was the lowest default rate since June 2006. Default rates for first mortgages continued their downward slide, settling at 1.01 percent in April.

The first mortgage default rate in April was the seventh consecutive month of decline, and was the lowest level seen since July 2006. However, the second mortgage default rate saw an increase, which posted at 0.63 percent for April 2014.

"The prospect for further gains in economic activity and consumer confidence is good as shown by the continuing decline in consumer credit default rates," says David M. Blitzer, Managing Director and Chairman of the Index Committee for S&P Dow Jones Indices. "Consumer default rates have stabilized at levels similar to those seen before the financial crisis."

Blitzer continued, "The national composite is nearing a historic low while the auto loan reached a historic low in April. Neither the one-month uptick in consumer price inflation nor the Federal Reserve's winding down of its bond buying threaten either consumer default rates or overall economic activity."

All five cities (New York, Chicago, Dallas, Los Angeles, Miami) measured by the S&P/Experian saw default rate decreases for the second consecutive month. New York experienced the largest month-over-month downturn, dropping 18 basis points below March’s default rate.

All five cities posted default rates below the previous year's rate.

Economy and Housing Market Projected to Grow in 2015

Author: Scott Morgan May 16, 2014 

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The good thing about economic recovery, even when it’s not living up to expectations, is that forecasters always remain optimistic for tomorrow.

Despite many beginning-of-the-year predictions about spring growth in the housing market falling flat, and despite a still chugging economy that changes its mind quarter-to-quarter, economists at the National Association of Realtors and other industry groups expect an uptick in the economy and housing market through next year.

The key to the NAR's optimism, as expressed by the organization's chief economist, Lawrence Yun, earlier this week, is a hefty pent-up demand for houses coupled with expectations of job growth—which itself has been more feeble than anticipated. "When you look at the jobs-to-population ratio, the current period is weaker than it was from the late 1990s through 2007," Yun said. "This explains why Main Street America does not fully feel the recovery."

Yun’s comments echo those in a report released Thursday by Fitch Ratings and Oxford Analytica that looks at the unusual pattern of recovery the U.S. is facing in the wake of its latest major recession. However, although the U.S. GDP and overall economy have occasionally fluctuated quarter-to-quarter these past few years, Yun said that there are no fresh signs of recession for Q2, which could grow about 3 percent.

A major key to housing growth, of course, is job growth. The U.S. overall has recovered nearly all of the eight million jobs lost to the Great Recession and, according to Yun, employment is expected to grow 1.6 percent this year and 1.9 percent next. Similarly, the GDP is on course to grow 2.2 percent this year and about 2.9 percent in 2015.

Eric Belsky, managing director of the JointCenter for Housing Studies at Harvard University, said that growth in the stock market and the recovery in housing, along with pent-up demand, are major factors driving the economy right now, leading economists like Yun and Belsky to suggest that housing will improve, just not on the schedule many other economists had expected.

One thing to keep in mind is that 2014’s spring housing sales figures are being compared to those from 2013, which saw impressive gains‒‒existing-home sales rose more than 9 percent to nearly 5.1 million last year‒‒after four years of sagging sales. Because of tight inventories and rising sales last year, the median existing-home price rose 11.5 percent to just over $197,000. Still, according to NAR, sales figures will likely decline about 3 percent over the rest of this year to just over 4.9 million, then trend up to more than 5.2 million in 2015.

According to Yun, home price growth is likely to moderate from more new home construction. "Based on our forecast for this year, the median home equity gain over three years is expected to be $40,000," he said. "A gap between new and existing-home prices from rising construction costs shows that prices are well supported by fundamentals in most of the country."

Housing starts have stayed below 1 million a year for the past six years, but need to reach the long-term average of 1.5 million to balance the market. "Because of the prolonged slowdown in construction, we now need 1.7 million housing starts per year to catch up," Yun said.

The sluggish recovery in housing starts is greatly affected by the fact that construction costs are rising faster than inflation. Add to that labor shortages in the building trades, and the onerous financial regulations preventing small banks from giving construction loans to small local builders, and it’s no wonder why construction starts are behind schedule, Yun said.

Dennis McGill, director of research for Zelman & Associates in New York, offered some hope. McGill said that his firm's most recent analysis of Census Data shows an average of only 720,000 housing starts annually from 2010 through 2013. "But our projections over the next five years exceed an average of 1.9 million," he said. "We won’t ramp up to that level right away, but if you average housing starts for the entire period from 2010 to 2019, it would be about 1.44 million."

McGill added that there is "a strong tailwind" to housing starts. "We're starting to see capital come back to single family construction, which is very favorable," he said.

Mortgage Rates Decline for Third Straight Week

Author: Tory Barringer May 15, 2014

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Mortgage rates pulled back slightly again this week, responding to what little major economic developments there were.

According to Freddie Mac’s Primary Mortgage Market Survey, the 30-year average fixed-rate mortgage (FRM) eased to 4.20 percent (0.6 point) for the week ending May 15, a drop of just 1 basis point from the last survey. It was the third straight week of declines, Freddie Mac reported, bring the 30-year fixed average to a six-month low.

At the same time, the 15-year FRM averaged 3.29 percent (0.6 point) this week, dropping from 3.32 percent.

On the adjustable rates side, the 5-year Treasury-indexed hybrid adjustable-rate mortgage (ARM) averaged 3.01 percent (0.4 point), down from 3.05 percent, while the 1-year ARM was unchanged at 2.43 percent (0.5 point).

“Mortgage rates were little changed amid a week of light economic reports,” said Frank Nothaft, chief economist at Freddie Mac. “These lower than expected rates are welcome news with the spring home buying season underway and may even provide those who haven't already refinanced possibly a reason to take another look.”

Bankrate.com’s national survey also saw declines in all categories. In its weekly release, the finance site recorded the 30-year fixed at 4.33 percent and the 15-year fixed at 3.42 percent, each down a few basis points. The 5/1 ARM, meanwhile, ticked down to 3.31 percent.

Even with the recent downward trend, the majority of analysts—62 percent—polled in Bankrate’s trend survey predict rates will remain more or less where they are over the coming week. However, a quarter of those surveyed expect a bump upward, including senior mortgage reporter Polyana da Costa, who reasoned, “Rates have dropped consecutively for three weeks. This is not sustainable. Even if we get more bad economic news rates should trickle up next week.”

Survey: Americans Don’t Know How Credit Scores are Calculated

Author: Tory Barringer May 14, 2014

Survey results show Americans—and Millennials especially—continue to have only a vague understanding of how their credit scores are calculated and used.

For the latest annual survey, the fourth of its kind, more than 1,000 representative American consumers were asked 19 questions designed to gauge their knowledge of credit scoring. The study was commissioned in partnership between VantageScore Solutions and the Consumer Federation of America (CFA).

While the findings illustrate respondents are aware of a handful of facts surrounding their credit score—for example, nearly nine in 10 know credit card issuers and mortgage lenders use them, and the vast majority know that a spotty financial history can affect their score—there are still some major gaps in their knowledge.

For instance, only half of consumers surveyed demonstrated a solid understanding of the three instances when lenders who use generic scores are required to inform borrowers of the credit score used in the lending decision: after a mortgage loan application, whenever a loan application has been rejected, or whenever the best terms are not available for the borrower.

Moreover, only 42 percent understand that a credit score actually measures the risk of not repaying a loan and is not a measure of credit attitudes or knowledge—a statistic CFA executive director Stephen Brobeck called “most troubling.”

“Consumers should be aware that they can take steps to reduce this risk and improve their scores, most importantly, by making all loan payments on time,” Brobeck said.

Calculating results by age, VantageScore and CFA found Millennials (those age 18–34) tend to have less understanding than older consumers. Among other findings, fewer than half of Millennials seem to comprehend that age is not a factor in calculating credit scores, and less than two-thirds know that the three main credit bureaus collect the information on which their scores are based (compared to three-quarters of older adults).

That gap comes as worrying news for VantageScore Solutions CEO Barrett Burns, who notes that younger consumers tend to start their adult lives with massive amounts of student debts that pose a threat to their credit profiles.

“We know that education can help consumers improve their scores, and whatever the consumer’s age, our aim is to arm him or her with accurate, unbiased information and resources to help them become good credit managers,” Burns said.

To that end, VantageScore and CFA have partnered to launch CreditScoreQuiz.org, a website designed to mimic the survey and inform consumers about how credit scoring works. The organizations also announced plans to host an online question and answer session on Twitter. The discussion, scheduled from 3–4 p.m. Eastern on May 20, can be joined using the hashtag #creditknowledge.

“This year’s survey clearly demonstrates a need to deliver educational resources to younger consumers and we’re pleased to again partner with VantageScore Solutions on the survey and to our broader educational program,” Brobeck said.

Case-Shiller Index: Home Prices Increase in Q4 2013

Author: Tory Barringer May 13, 2014 0

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With 2014 nearing its halfway point, a broad spectrum look at more than 380 markets nationwide confirms home prices jumped 11.3 percent in 2013’s final quarter compared to the year prior.

CoreLogic released Tuesday its own quarterly Case-Shiller Indexes, assembled using the company’s proprietary data supplemented with statistics from the Federal Housing Finance Agency (FHFA). The analysis differs from the monthly S&P/Dow Jones Case Shiller Indices in that it covers a wider range of markets over a different time frame.

While price percentages nationwide were up by double-digits in Q4, seven cities managed to shoot up into the 20 percent range year-over-year, with Las Vegas leading at 25.6 percent growth. The remaining six cities were all in California: Riverside (+23.8 percent), Oakland (+23.3 percent), Sacramento (+23.0 percent), Los Angeles (+20.3 percent), San Jose (+20.1 percent), and San Francisco (+20.0 percent).

The sharp increase comes as no surprise for the region, which has suffered from low inventory levels throughout the recovery.

“Limited construction of new homes and low inventories of existing homes for sale contributed to the jump in prices,” said Dr. David Stiff, principal economist for CoreLogic Case-Shiller. “Developers remain cautious about building too many new houses until they see stronger demand in their markets.”

Additionally, prices climbed up to new peaks in a number of metros, including Houston, Dallas, Denver, Honolulu, and Pittsburgh.

“These cities have never achieved price levels quite this high, not even in the record year of 2006,” Stiff said.

Even with so many markets remaining hot, CoreLogic is among those industry analysts calling for a drop-off in price gains this year. Through December 2014, the company predicts price appreciation will slow to 5.3 percent nationally, though that still comes in above the long-term annual average of 4.5 percent.

“For the remainder of 2014, investor demand and sales of foreclosed properties should drop off quickly. Traditional buyers are returning slowly to the market, but cannot replace demand from investors who led the market in recent years,” Stiff said.

5 Reasons to buy a home now!

Based on prices, mortgage rates and soaring rents, there may have never been a better time in real estate history to purchase a home than right now. Here are five major reasons purchasers should consider buying.

1. Competition is about to Increase

Every spring a surge of prospective purchasers enter the housing market. Like you, they will want the best home available in the best location at the best price. They will be competing with you for the ‘steals’ in the market. Don’t miss the opportunity to get that ‘once-in-a-lifetime’ buy available today that no longer be available as the market heats up.

2. Price Increases Are on the Horizon

Nationally, home prices are projected to appreciate by 4.5% in 2014 and by over 19% from now until 2018. First home buyers will probably pay more both in price and interest rate if they wait until the spring. Even if you are a move-up buyer, it will wind-up costing you more in net dollars as the home you will buy will appreciate at approximately the same rate as the house you are in now.

3. Owning a Home Helps Create Family Wealth

Whether you rent or you own the home you are living in, you are paying a mortgage. Either you are paying your mortgage or your landlord’s. The Federal Reserve, in arecent study, revealed that the net worth of the average homeowner is 30 times greater than that of a renter.

4. Interest Rates Are Projected to Rise

The Mortgage Bankers Association, the National Association of Realtors, Freddie Mac and Fannie Mae have all projected that the 30-year mortgage interest rate will be over 5% by the spring of 2015. That is an increase of almost 3/4 of a point over current rates.

5. Buy Low, Sell High

Most would all agree that, when investing, we want to buy at the lowest price possible and hope to sell at the highest price. Housing can create family wealth as long as we follow this simple principle. Today, real estate is selling ‘low’ compared to where it will be next year. It’s time to buy.

Source: The KCM Crew

Mortgage Rates Continue Downward Slide

Author: Tory Barringer May 8, 2014

Share on facebookShare on twitteDespite performing far better than anticipated, April jobs numbers weren't enough to prop up fixed mortgage rates this week, market reports show.

In its Primary Mortgage Market Survey, Freddie Mac clocked the 30-year fixed-rate mortgage (FRM) at an average 4.21 percent (0.6 point), down from 4.29 percent and the lowest level since late last year. A year ago, the 30-year FRM averaged 3.42 percent.

The 15-year FRM also moved down, dipping to 3.32 percent (0.6 point) from 3.38 percent in last week’s survey.

Adjustable rates were flat to down, meanwhile. For this week, Freddie Mac reported the 5-year Treasury-indexed hybrid adjustable-rate mortgage (ARM) remained unchanged at 3.05 percent (0.5 point), while the 1-year ARM slid down to 2.43 percent (0.4 point).

For its own weekly release, finance site Bankrate.com recorded the 30-year fixed at 4.37 percent, down from 4.44 percent, while the 15-year fixed was down to 3.45 percent from 3.51 percent previously. Also declining in Bankrate's survey was the 5/1 ARM, which fell a basis point to 3.34 percent.

While a strong jobs report would typically give some lift to rates, analysts speculate that the underlying numbers beneath April’s report might have dulled any optimism the headline number created.

Surveyed for Bankrate’s weekly Rate Trend Index, Michael Becker, a mortgage banker at WCS Funding Group, explained: “The household survey, which is where the unemployment rate comes from, showed a loss of 73,000 jobs, and 806,000 people left the workforce. ... When you combine tepid employment and income growth with geopolitical concerns in Ukraine, you get lower rates.”

For the next survey, 60 percent of commentators polled by Bankrate expect rates to remain more or less unchanged. The rest were split evenly between predictions of upward or downward movement.

Mortgage Delinquency Rate Continues to Drop

Author: Colin Robins May 7, 2014

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The mortgage delinquency rate declined to 3.61 percent at the end of the first quarter of 2014, according toTransUnion's latest mortgage report. Overall, the mortgage delinquency rate has dropped 24 percent in the last year, and has experienced nine consecutive quarters of decline.

Currently, the rate is at the exact same level as it was in the second quarter of 2008, according to the company.

"It's encouraging to see mortgage delinquencies drop once again, especially during a period when mortgage originations slowed considerably," said Steve Chaouki, head of financial services for TransUnion. "This trend in improved performance is driven in part by lenders working their way through the foreclosure backlog, along with continued conservatism in underwriting new mortgages."

Statewide, all 50 states and the District of Columbia saw declines in mortgage delinquency rates between the first quarter of 2013 and the first quarter of 2014. The largest percentages of decline continue to occur in states most impacted by the mortgage crisis: Arizona (-37.8 percent), California (-36.9 percent), and Nevada (-34.0 percent).

"Both Arizona (2.81 percent) and California (2.80 percent), which just five years earlier had delinquency rates nearly double the national average, are now significantly lower than the rest of the nation," TransUnion remarked.

States with the smallest year-over-year declines include New York (-7.9 percent), New Jersey (-8.1 percent), and Vermont (-8.5 percent).

The company projects that consumer delinquency trends will continue on a downward slide. TransUnion forecasts that mortgage delinquencies will continue falling to approximately 3.4 percent by the end of June. The company based its projections on different economic assumptions, such as gross state product, consumer sentiment, unemployment rates, real personal income, and real estate values.

"We expect mortgage originations will once again pick up steam, and with continued tight lending standards, this should only help further bring down the mortgage delinquency rate," Chaouki added.